"A top priority must be to reverse our dismal high school graduation rates -- with a target of doubling the number of young people who graduate from high school ready for college, career and life -- and to place a major emphasis on encouraging careers in math and science," Gates said.

Gates said immigration reform is needed as well. He cited the H-1B visa and green card programs as areas in need of change.

The U.S. will begin accepting applications for H-1B visas April 1 for the new fiscal year, and Gates said he expects the supply of visas will also run within a month. The U.S. set a cap of 65,000 visas but has an additional 20,000 visas available to foreign nationals who graduate with advance degrees from U.S. universities. There are other exemptions in the program as well.

Regarding the H-1B program, Gates predicts that "for the first time in the history of the program, the supply will run out before the year's graduating students get their degrees. This means that U.S. employers will not be able to get H-1B visas for an entire crop of U.S. graduates. We are essentially asking top talent to leave the U.S."

Gates also said the U.S. has to increase spending on basic research significantly.